The Trade Secrets Blog

Following Trade Secrets Litigation

It’s All Greek To Them

Silicon Valley/San Jose Business Journal is reporting that Language Line Services Inc. and Tele-Interpreters, LLC, a competitor in the language interpretation industry, has sued Voiance Language Services for misappropriation of trade secrets and customer information.

Voiance has allegedly hired an ex-employee of Language Line who had possession of Language Line’s and Tele-Interpreter’s trade secrets.

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The suit says Voiance has used trade secrets it got from its new hire “to cut short the otherwise long and uncertain process that would have been required for identifying, contacting and enticing Tele-Interpreters’ customers.”

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August 28, 2009 Posted by | Intellectual Property, misappropriation, Trade Secrets | , , | 1 Comment

IBM Tries For A Second Bite at the Apple (or Dell in this case)

Back in June I posted on IBM’s lawsuit against it’s former M&A chief, David Johnson, here. IBM sought a preliminary injunction to prevent Johnson from performing his duties at Dell. The Judge denied the preliminary injunction on June 26, 2009, saying that it would unfairly hurt Johnson’s career.

IBM appealed the ruling. However, not satisfied, IBM also sought to revive its motion for preliminary injunction based on the discovery of new evidence against Johnson. The New Brunswick Business Journal is now reporting that U.S. District Judge Steven Robinson denied IBM again. Robinson wrote, “The court shall not allow IBM to litigate this matter through piecemeal, seriatim motions requesting the same relief.” According to Robinson, such a method “is vexatious and does a great disservice to the interests of Mr. Johnson and of the court.”

The litigation appears to center around the validity of a 2005 agreement, specifically, whether it is valid even though it wasn’t properly signed by Johnson and IBM never followed through on threats to take away his equity in the company if he didn’t re-sign it. According to Johnson, he deliberately signed the agreement in the wrong place.

Take away message: Make sure your employees sign any agreements in the correct place. There really is no reason for an employee not to do so, unless he plans on creating wiggle room for himself as Mr. Johnson has done.

August 7, 2009 Posted by | confidentiality agreement, Intellectual Property, misappropriation, non-compete agreement, trade secret theft, Trade Secrets | , , , | 1 Comment

IBM Sues Former M&A Chief

Websphere Journal is reporting that IBM has sued its former M&A chief, David Johnson, for taking a job with Dell Computers. The suit is based on a 2005 non-compete agreement signed by Johnson–IBM accuses Johnson of misappropriating trade secrets.

Key graph:

“the complaint against Johnson says the information he possesses is “among the company’s most competitively sensitive information, is carefully guarded, not made accessible to the public or IBM’s competitors, and is disclosed even to IBM employees on a strict ‘need to know’ basis.”

Johnson knows what companies and technologies IBM plans to invest in, when, what ROI it expects and what it may divest.”

It appears that IBM is basing its claims on the “inevitable disclosure doctrine” as there are no actual allegations of misappropriation. This will bear watching…

June 5, 2009 Posted by | Intellectual Property, misappropriation, non-compete agreement, trade secret theft, Trade Secrets | Leave a comment

Activision Ordered to Hand Over Source Code

According to Gamespot.com, A Judge has ordered Activision to hand over the source code for the DJ game, Scratch: The Ultimate DJ. This case has gotten interesting fairly quickly. Let’s recap.

Activision was sued on April 14 by Genius Productions and Numark Industries for “intentional interference with contract, breach of contract…and misappropriation of trade secrets” after Activision purchased Scratch developer 7 Studios. 7 Studios is under contract to develop Scratch: The Ultimate DJ, for Genius and Numark.

Gamespot.com reported on April 16, 2009, the following: “Genius and Numark’s [April 14] filing claimed that Activision contacted them via the cash-strapped 7 Studios expressing interest in buying Scratch: The Ultimate DJ. However, after announcing its own DJ Hero game and seeing a demo of Stratch, Activision allegedly broke off negotiations and promptly bought 7 Studios. The suit then contends that 7 Studios slowed work on the game and refused to turn over software and a Numark turntable-inspired controller when Genius terminated its contract.

In addition to “substantial damages” and a return of its assets, Genius and Numark sought a restraining order against Activision’s release of DJ Hero so Scratch could retain its “‘first to market’ status.”

Then, Activision released statement announcing that a Los Angeles judge had rejected the request for a restraining order, citing a lack of evidence:

“Activision Publishing strongly denies the allegations made by Genius Products and Numark Industries and believes that the claims are disingenuous and lack any merit. Yesterday, the L.A. Superior Court found that there was no evidence of any wrongdoing by Activision and refused to grant any restraining order against Activision.

“These allegations are nothing more than an attempt by Genius to place blame for the game’s delay, as well as to divert attention from the cash flow, liquidity, and revenue challenges Genius detailed in its March 30, 2009, SEC filing. By their own admission in October 2008, the game had fallen behind in production, which was well before Activision had any involvement with Genius, Numark or California 7 Studios regarding the game.”

So, that’s the background.

On April 20, 2009, gamespot.com reported that “Genius and Numark are claiming that it was they, not Activision, who prevailed in court last week. Through an external publicity agency, the companies made public the transcript of the April 15 hearing, which was presided over by Judge James C. Chalfant.”

The hearing began with the judge saying that, “There isn’t any evidence against Activision. …There is no reason to restrain Activision from doing anything.” However, the judge quickly added that “There is evidence that…7 Studios has a duty to return the work product, source code, and software of the plaintiff [Genius].”

“It is actually very straightforward. They hired you. They have terminated the deal. Their agreement requires return of materials,” said the judge. “No matter how you slice this banana, they are entitled to the work product back. I don’t know why your client would want to continue working on a project for which they have been terminated.”

Chalfant then ordered Activision to make its 7 Studios subsidiary turn over the Scratch source code by today, April 20, in preparations for a subsequent hearing next month. “You [Activision] turn over the source code, and then if you want it back, you can argue on May 6th as to why you should get it back. I can’t under any circumstance think why you would be entitled to keep the source code.”

Next step is the May 6 hearing on damages. We’ll keep you posted.

April 24, 2009 Posted by | Intellectual Property, misappropriation, trade secret theft, Trade Secrets, Uncategorized | , , , , , , | Leave a comment

ClearOne Maintains Its Award

I reported on this jury verdict back in November here. According to websitegear.com, it appears that the Judge has entered a Final Order awarding $9.6 million, not much less than the jury’s award.

It appears the Judge was pretty convinced of BiAmp’s wrongful actions:

As to defendant Biamp, the court ruled that the finding of willful and malicious trade secret misappropriation by Biamp was supported because “Biamp deliberately ignored numerous warning signs suggesting that the AEC technology offered by WideBand was not WideBand’s to sell. Given all the facts presented to Biamp at the time, it could not have held a good faith belief that its use of the WideBand code was valid,” and that Biamp earned over $1.5 million “by purchasing the WideBand technology at half the price offered by ClearOne and then selling the technology at the same price it charged when dealing with ClearOne.” The court also wrote that “having reviewed the testimony of Biamp’s witnesses…the court finds that the jury (who has the sole responsibility to assess witness credibility) reasonably found by clear and convincing evidence that Biamp’s behavior was willful and malicious.” For these and other reasons, the court concluded that “an award of exemplary damages against Biamp is appropriate to punish Biamp for ignoring its due diligence duties in order to profit at the expense of a competitor and to send a message deterring other companies from engaging in similar conduct.”

April 24, 2009 Posted by | Intellectual Property, misappropriation, trade secret theft, Trade Secrets | , , | Leave a comment

Luna Innovations Eclipsed By $36 Million Award

Law.com is reporting that a California jury hit Luna Innovations for $36 million in damages for breaking an agreement Luna had with hansen Medical to develop a robotic catheter and misused trade secrets to land a contract with Hansen’s competitor, Intuitive Surgical, Inc.

Key sentence: “The jury found that Luna breached its contract with Hansen in five ways, including breaking a nondisclosure agreement and failing to offer Hansen the first opportunity to negotiate an exclusive license to the technology they were developing together.”

It’s worth noting that Hansen had the opportunity to win this one because there was a nondisclosure agreement signed before any information of Hansen’s was disclosed to Luna. It is critical for small businesses looking to partner up that they execute nondisclosure agreements to protect their trade secrets.

April 24, 2009 Posted by | Intellectual Property, misappropriation, non-disclosure agreement, trade secret theft, Trade Secrets | , , , | Leave a comment

Microsoft Begins Trade Secret Suit

Biggest news is that Microsoft is getting into the trade secrets fray. Geek.com is reporting that Microsoft has sued its former employee Mike Mullor (no, it’s not what you think–this has nothing to do with an ex-employee taking other employees and trade secrets with him–although I can’t fault you for thinking so) for breach of contract, theft of confidential documents, non-disclosure of intentions, fraud, misappropriation of trade secrets, and unjust enrichment.

It appears that Mr. Mullor, who before beginning work at Microsoft, owned a company called Ancora that was no longer trading, applied for and got a job with Microsoft in 2005 and began compiling information allegedly in fulfillment of a scheme whereby he would take the information and then turnaround and sue Microsoft in a patent infringement case for his startup company.

According to the article: “Mullor thought he was covering his tracks by using software that deleted traces of him downloading files, but Microsoft managed to find the evidence it needed to prove he downloaded files.”

Microsoft “also managed to turn up e-mail evidence [that Mullor] was planning patent lawsuits from 2004, before he joined them.”

Mullor’s response: “These are shameful, dishonest attacks on my character by Microsoft — the company that stole my idea in the first place … Microsoft fired me for trying to protect my own invention — an invention I told them about before they ever hired me.”

Muller also claims that “Microsoft knew about the patent and Ancora and that he discussed it with Microsoft lawyers and their anti-piracy group before taking employment with the company.”

This could get very interesting. Stay tuned . . .

February 5, 2009 Posted by | misappropriation, trade secret theft, Trade Secrets | , , | Leave a comment

Hey Ya! Andre 3000 Sued for $2 Million

bostonherald.com is reporting that Andre Benjamin aka Andre 3000 of the musical group Outkast has been sued, along with the Cartoon Network and Turner Broadcasting, by Timothy McGee, a Boston postal worker, for $2 million in damages relating to animated series “Class of 3000.” The suit claims copyright infringement, breach of contract and misappropriation of trade secrets and requests damages “including but not limited to” all the profits from the show, legal fees and “whatever this court may deem additionally just and proper.” Unfortunately for McGee, the profits from the show aren’t that extensive as it has already been cancelled.

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Timothy McGee, 33, a former art student, claims he developed “characters, artwork, storylines . . . and concepts” for an animated series he called “The Music Factory of the ’90s,” nearly 10 years before the oddly similar “Class” began airing on the Cartoon channel.

and:

In 1997, the Boston guy submitted a proposal for his show to Michael Lazzo, then a vice president of programming for the Cartoon Network, and promptly received a rejection letter.

Nine years later, in November 2006, the Cartoon Network premiered “Class of 3000,” an animated series set in Atlanta.

Only time will tell if McGee has the goods to be able to hang this one on Andre. A good place to start will be any documentation he submitted to Lazzo in 1997, the rejection letter, and (if he’s lucky) a non-disclosure agreement. Oftentimes, when people pitch shows or ideas, the programming executive refuses to sign non-disclosures on the chance that they are pursuing a similar themed show already. These cases are notoriously hard to prove because of the passage of time and the difficulty of getting the right witnesses–is Lazzo still working for Cartoon Network (the article is unclear), and what documents still exist at Cartoon Network that might support McGee’s claim?

Another question, is it going to be worth it for McGee? This is not a question to be taken lightly. Even though you may have been wronged, a good business person will always, always conduct a cost-benefit analysis of pursuing a claim. If the damages aren’t great enough, there is little sense in filing a lawsuit and paying a lawyer lots of money just to achieve the satisfaction of knowing that a court of law agrees that you were wronged. A simple maxim: If the damages aren’t there, it is rarely worth it to litigate.

In this case, I see little reason to pursue this claim. Even if McGee were to win in spectacular fashion, the odds that an animated feature on the Cartoon Network that lasted for only two years will have generated enough profit to justify an award of $2 million is debatable.

We’ll keep you posted on this one.

December 12, 2008 Posted by | Intellectual Property, misappropriation, non-disclosure agreement, trade secret theft, Trade Secrets | , , , , , , , , , | Leave a comment

Clear Win for ClearOne

I’m a little late on this one but, better late than never. According to marketwatch.com, ClearOne Communications was awarded in excess of $10 million by a jury in a federal trade secret case in Utah. ClearOne sued BiAmp Systems, WideBand Systems, Dr. Jun Yang (a former employee of ClearOne), Andrew Chiang, Lonnie Bowers and Versatile DSP, Inc. for misappropriation of trade secrets, breach of contract, breach of the covenant of good faith and fair dealing, and breach of fiduciary duty relating to the theft of algorithms and computer code.

Key Graph:

On November 5, 2008, the jury returned a verdict in the Intellectual Property Case in favor of ClearOne and against all of the Defendants. Accordingly, the jury awarded ClearOne approximately $3.5 million in compensatory damages and $7.0 million in punitive damages. Among other things, the jury found that all of the Defendants willfully and maliciously misappropriated ClearOne’s trade secrets. Based on that finding, the court may also award ClearOne exemplary damages and reasonable attorneys’ fees. The court left in place the previously-entered preliminary injunction, pending ClearOne’s application for entry of a permanent injunction against the Defendants.

Big win for ClearOne and congratulations to the Magleby & Greenwood law firm who obviously did an exemplary job of presenting ClearOne’s case to the jury. Big wins like this typically mean that a company has paid attention to its trade secrets protection plan and adhered to its implementation, including, confidentiality agreements, exit interviews, password protections, limited access, etc. Your company should be doing the same thing.

November 21, 2008 Posted by | Intellectual Property, misappropriation, trade secret theft, Trade Secrets | , , , , , , , , | 1 Comment

Ex-Intel Employee Indicted for Trade Secret Theft

Networkworld.com is reporting that Biswamohan Pani, a design engineer at Intel’s Hudson, Massachusetts offices before going to work for AMD, is accused of stealing $1 billion worth of trade secrets to help his new employer.

Key graph: “Pani is accused of accessing Intel’s network remotely and downloading 13 top-secret documents and other proprietary information related to methods for designing microprocessors, “including a document explaining how the encrypted documents could be reviewed when not connected to Intel’s computer system” the Telegram reports.”

Apparently AMD was unaware of the theft. “Prosecutors say Pani planned to use the secrets to advance his career at AMD. The information Pani allegedly downloaded “was worth more than $1 billion in research and development costs,” the Associated Press reported. Pani told investigators he downloaded the top-secret documents to help his wife, who works for Intel, the Telegram reports.”

The defense that he was just helping his wife is an interesting one. It will be interesting to see how it plays. Would the wife need the information that he accessed to do her job? Was the wife cleared to access the allegedly stolen documents? How did Pani access the documents? Using the wife’s clearance or his own clearance from when he used to work for Intel? There are a lot of unanswered questions and we’ll keep an eye out on this one. My guess is that the “I did it for my wife” defense won’t stand up to scrutiny. As far as trade secrets cases go, this is about as big as it gets and will be very interesting to follow.

One word of advice for Intel: If your ex-employees can access over $1 billion worth of information from a remote location after they have started work for your major competitor, your trade secrets protection plan needs some serious work. While it is all well and good to have confidentiality agreements, and the like in the event of something like this, doesn’t it just make sense to ensure that its secure from this type of misapproriation in the first place? $1 billion worth of information was available remotely? It’s an eye-popping amount of information to have floating in cyberspace, ripe for the plucking by ex-employees.

November 7, 2008 Posted by | confidentiality, confidentiality agreement, misappropriation, non-disclosure agreement, trade secret theft, Trade Secrets | , , , , , , | 1 Comment